Kickstarter: An Eden for Fraudsters and Dumb Ideas?

Slack AliceSlogger, Infosecurity Magazine

A Kickstarter campaign that started as a jokey quest to crowdsource $10 for a killer mixture of spuds, veggies, spices and mayo spiraled out of control last summer, eventually netting Jack Danger Brown a whopping amount of, err, cabbage, so to speak. Brown became a viral internet sensation, entrepreneurs everywhere found fresh encouragement, and local charities got a big helping of the proceeds.

It may have been a positive for everyone involved (not least potato salad fans), but in a lot of ways it solidified Kickstarter’s status as the embarrassing little brother to real venture capitalists.

HBO’s brilliant Silicon Valley comedy did a not-too-fine-a-point send-up of the movement which showed an app called ‘Bro’ getting funded via Kickstarter. All the app does is allow dudes to send messages back and forth to each other that say, you guessed it, ‘Bro’. But the joke is obvious: As dumb of an idea as bro-ing is, the internet peoples came in droves to offer up their monies to it.

So it’s interesting that the FTC has now busted someone for duping the non-business-savvy populace—which should spark a conversation around the parameters of caveat emptor. But it turns out that the project’s backers—who were all for it when it sounded too good to be true—are a bit nonplussed that they’re not getting their promised return on investment. Which, incidentally, was to come in the form of various dark fantasy figurines.

A bro named Erik Chevalier found himself in the enviable position of raising more than four times the amount that he originally wanted in a crowdfunding campaign for a board game, evocatively called ‘The Doom That Came to Atlantic City’. No word on if the doom involved also came for Donald Trump, but, presumably that would be a nice plus.

Chevalier had a funding goal of $35,000 and ended up with more than $122,000 when all was said and done. Apparently, people really liked the idea of an old-school physical strategy game, which would have an old-fashioned board and old-fashioned game pieces and nary a hint of video or virtual anything.

But here’s the rub: Chevalier was promising attractive swag in return for under-$100 pledges. For instance, consumers who pledged $75 or more would receive “a copy of the game with Paul Komoda’s figures in pewter.” That’s right folks, you too can sign up for pewter mini-sculptures by one of the better-known artist names in sci-fi/fantasy world—at a fraction of the cost that they would go for in a store.

But why be suspicious? After all, the homepage provided a video of the artists describing the game as well as a demonstration of people playing a prototype of the game—must be legit, right?

Well I can reveal that…it wasn’t to be. Please keep gasps to a minimum.

Chevalier went on to spent months citing a variety of reasons for delays in production, including patent infringement issues and “manufacturing issues abroad,” sprinkled in-between broken delivery-date promises.

Eventually, he issued a statement to his backers promising refunds and explaining that “the intention was to start a board game company with the Kickstarter funds” and that “after paying to form the company, for the miniature statues, moving back to Portland, getting software licenses and hiring artists to do things like rule book design and art conforming, the money was approaching a point of no return.”

All of which is a crock of, well, potato salad, according to the FTC. The running-out-of-runway excuse was as non-existent as those refunds, which—gasp again—never came.

“In reality, Defendant never hired artists for the board game and instead used the consumers’ funds for miscellaneous personal equipment, rent for a personal residence, and licenses for a separate project,” the agency said.

Now, is this a case of a non-savvy kid with a dream getting in over his head? It could be that Chevalier simply turned to Kickstarter to fund an idea without a solid marketing plan behind it—only to underestimate the logistics. And then be surprised that he couldn’t use the proceeds to fund a different idea. Plus rent. And, you know, stuff.

Or, is this a hard-core fraudster who traded on the “those idiots will fund anything” reputation of Kickstarter enthusiasts to amscray with fraudulent gains?

Does motive matter? What part do investors play in this? They were willing to sink money into something that offered very little detail as to its plan for long-term viability—and what is investing if not a gamble of sorts. Is this a buyer-beware situation and they get what they get?

You be the judge: The FTC, citing Chevalier’s inability to pay, is absolving him of having to make the refunds. But, the settlement bans Chevalier from making misrepresentations about future fundraising campaigns. Oooooh, that’ll teach him.

But, the FTC feels it’s done its job here, even though there is no remediation for investors. “The FTC's complaint says that Chevalier’s promises were deceptive,” FTC staff attorney Lisa Weintraub Schifferle explained. “The case offers a classic lesson in consumer protection law: when you make a promise, you have to deliver.”